Banks set to lend a hand downtown

Property owners could soon call Downtown Gilroy home again. And
for much less than they previously thought. And for much less than
they previously thought. City officials met with representatives
from nine banks Thursday morning in hopes of developing ways to
assist downtown landlords in retrofitting and reopening
unreinforced masonry structures in downtown.
View Gilroy URMs in a larger map

Unreinforced masonry buildings in Gilroy as of Jan. 4, 2011.

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Property owners could soon call Downtown Gilroy home again. And for much less than they previously thought.

City officials met with representatives from nine banks Thursday morning in hopes of developing ways to assist downtown landlords in retrofitting and reopening unreinforced masonry structures in downtown.

A task force comprised of Mayor Al Pinheiro, Councilman Perry Woodward and local resident and developer Gary Walton has also been working on a new ordinance that would significantly reduce the retrofit requirements for owners of those buildings. They said they hope the new ordinance, which will go before the Gilroy City Council either Jan. 24 or Feb. 7, would entice landlords to renovate and reopen unreinforced masonry structures, also known as URMs, and revitalize downtown.

URMs are structures containing masonry materials that are not braced by reinforcing beams, thus posing a safety hazard in an earthquake.

The city passed an ordinance in November 2006 that gave URM building owners in Gilroy three years to complete retrofit work. In December, the Council extended the deadline to June 30, 2011.

As of Jan. 4, there are currently 28 vacant URMs in downtown, according to city documents.

If passed, the new ordinance would no longer require property owners to complete full retrofits of their buildings, and would require instead simpler, less expensive “life safety” retrofits.

The new mandatory retrofit standards include securing walls to roofs, reinforcing parapets, completing an engineer’s report and strengthening any other components that would pose immediate dangers during an earthquake, Pinheiro said.

Property owners would still have to pay for a full retrofit to have their buildings removed from the city’s hazardous buildings list, according to the ordinance.

Walton said a full retrofit could cost $100 to $150 per square foot, whereas the proposed retrofit could cost $10 to $20 per square foot.

“I think the financing is the key to getting the buildings occupied,” Walton said. “For some, we’ll have to hold their hand through the process.”

Woodward said some property owners have “a sense of hopelessness” over how they can afford to retrofit.

Property owners cannot rent to tenants until their buildings are retrofitted.

“It’s not an easy discussion,” Woodward said.

Pinheiro said the city would draft a survey and deliver it to affected property owners to get a better idea of their needs.

Tim Rios, senior vice president and community development manager for Central and Northern California for Wells Fargo, said Thursday that banks should be able to start helping property owners immediately.

“I think it’s a duty of the community to come together and find a solution,” Rios said, “especially if we have concerns of getting Downtown Gilroy to what it should be.”

Rios said banks could also assist property owners who don’t qualify for traditional funding, such as small business loans.

“We need to find out what the solutions are for those people,” he said. “Give them choices other than just paying the fines.”

Under the proposed ordinance, property owners would be fined $500 a month for failing to complete a limited engineering analysis and building permit application within 12 months of the ordinance’s passage. A $1,000 fine would be assessed every month for failing to complete the new mandatory retrofit standards within 24 months of the ordinance’s passage.

Property owners would be fined no more than $15,000.

As it stands now, building owners would be forced to pay $10,000 per month after the June deadline hits, but Pinheiro said any discussion over penalties was currently on hold.

“We’re not applying fines at this time,” he said.

Pinheiro said the task force will work with bank representatives on either developing a pool for lending to downtown property owners or taking part in a pool in which the banks already participate.

Walton said the city could take advantage of community block development grants to assist downtown.

Sunil Patel, who owns two unoccupied properties in downtown Gilroy, said the ordinance would make it easier for him to begin renting again but it wouldn’t fix all the problems.

“If I can get the funding that allows me to do the retrofit, then I can do that,” he said. “But if the city doesn’t resolve other issues, such as parking and other things, there could still be no one to rent to.”

Patel said the situation presented a “catch-22.”

If he borrows the money to complete a life safety retrofit or full retrofit, there’s no telling how long he could be waiting before finding a tenant willing to open a business downtown, he said.

“We’ve got problems all the way around,” Patel said. “We’re in a no-win situation unless there’s some miracle or some help from the city or somewhere.”

Despite his cautious outlook, Patel said downtown businesses could “definitely” be renewed.

Walton said putting a spark into downtown was crucial.

The businesses that aren’t closed are hurt financially by unoccupied buildings because people have less reasons to venture downtown, he said.

“They’ve been impacted because there’s not as many feet downtown,” Walton said.

Walton said the city was losing potentially hundreds of thousands of dollars per business per year.

The lack of a vibrant downtown can hurt Gilroy over time, he added.

“People draw perceptions of a city from what their downtown is,” Walton said. “That affects investment in the city. Downtown is important in a number of different ways.”